Question of the Week: High-3 Average Salary

Q: After a long break in federal service, I recently returned to a federal position with a modest salary. Although I plan to continue this job until I’m old enough to qualify for an immediate retirement, I don’t expect to reach the salary level that I previously had when I was a federal employee years ago. How will my current salary affect the high-3 average salary that the Office of Personnel Management (OPM) uses to calculate my annuity?

A: By definition, the “high-3 average pay” is the largest annual rate resulting from averaging an employee’s rates of basic pay over any period of three consecutive years of creditable civilian service, with each rate weighted by the length of time it was in effect. When OPM computes your retirement benefit, it will identify the three years of consecutive creditable federal civilian service where your basic salary rates were the highest. When the agency looks at your salary history, it ignores breaks in service by squeezing your entire federal career together (from beginning to end), as if you had no breaks in federal service, and then searches for the highest three consecutive years of basic salary earned while employed. In some cases, like yours, the high-3 average salary may not be the last three years but another three-year period that produces a higher average.

Now that you have returned to federal service, I’d recommend that you ask your agency’s retirement office to prepare a retirement estimate report, which will show the correct high-3 average salary.

You can find additional details about how OPM computes high-3 average salaries in chapter 50 of the Civil Service Retirement System (CSRS)/Federal Employees Retirement System (FERS) Handbook.